Growing Pains

Brown, too, is taking it slower with his new Oakland-based company, California Direct. “We have only 12 employees now and we’re not doing any of the production work in-house,” says Brown. “Our customers are mainly small to mid-sized companies, which are easier to work with than big ones, in many cases. Our overhead is down, I spend more time with my family, and this is a more cost-effective way to do business.” Although Brown still has growth plans, they’ve been downsized. “We’re aiming to reach around 40 employees in three years,” he says.” With 200 employees, which we had in the past, all you do is find yourself managing HR issues.”

There are numerous potential risks involved with growing a business: hiring too many people, investing too much in equipment, leaving yourself open to your competitors. And, while there are no easy solutions to these issues, coming up with potential answers is more likely if you have an idea of where you’d like to go and how you’ll get there.

“One business owner I’m advising has a machine shop. He can’t find time to write a business plan so he spends time spinning his wheels.” says William Walsh, a counselor with the Service Corps of Retired Executives in Mayfield Heights, Ohio. SCORE is a nonprofit organization that provides counseling under a grant from the Small Business Administration. “Even though he is a skilled machine programmer, he still has to take time out to do things like make deliveries,” sa
ys Walsh.

“Eventually, he will have to come up with a plan,” explains Walsh. “He hates paperwork, though. To get him started, I suggested that he write one segment, then do another one. Subdivide the plan into sizable chunks and create it, one chunk at a time.” Once you know the right direction, you can follow the path to growth, avoiding the low road as well as the high road.

Green Light, Yellow Light
What are some of the signs that it may be time to branch out? “Cash flow,” says Tom W. Williams Jr., managing partner of Williams, Adley & Co. L.L.C., a CPA and management consulting firm headquartered in Oakland, California. “When your business is generating more than enough money to provide you with a comfortable living, that’s a sign you’re ready for expansion.”

A similar thought is echoed by Jana Matthews, founder of Boulder, Colorado-based consulting firm Boulder Quantum Ventures, and co-author of Leading at the Speed of Growth: Journey from Entrepreneur to CEO (Wiley; $24.99). “You can tell it’s time to expand from your incoming orders,” says Matthews. “When people begin to call all the time and you can barely keep up with the business as it comes in—that’s one of your growth signals.”

Bruce Phillips is a senior fellow in regulatory studies at the National Federation of Independent Business (NFIB) in Washington, D.C. “Our latest survey, Small Business Problems and Priorities, released in 2004, showed some of the concerns that growth can